St. Louis area credit unions reap benefits of big bank blunders

It’s heady days at St. Louis-based First Missouri Credit Union. In the past six weeks the financial institution has picked up 20 new members. That might not sound like much, but it’s twice the usual rate for the 7,500 member credit union.

“Credit unions have really gotten a boost. People want to learn more about the alternatives to the large banks,” said President and CEO Steve Ogolin.

The statewide numbers back up Ogolin’s impression. Some 7,100 new members have brought $49 million to Missouri credit unions since September, according to figures compiled by the Missouri Credit Union Association.

The local exodus from big banks to nonprofit credit unions reflects a national trend.

Credit unions have attracted 650,000 members and $4.5 billion in savings deposits recently, according to the Credit Union National Association (CUNA). The uptick in credit union membership tracks back to decisions this fall by big banks, especially Bank of America, to begin charging customers $5 a month to use their debit cards.

But by November, most of the banks, including Bank of America, rescinded the fee in the face of public outcry. By then the damage had been done, and credit unions were reaping the rewards of the big bank’s blunder.

With 36,800 members, St. Louis-based Neighbors Credit Union has been picking up a few hundred new members over the past couple of months. By moving their checkbooks to credit unions, people are largely voting with finances in mind. “They are telling us they are tired of the bank fees,” said Vice President of Marketing Becky Buehl.

While momentum has been building for a while, credit unions got a boost from the Nov. 5 Bank Transfer Day. An initiative launched through social media, the event encouraged consumers to pull their accounts from large financial institutions and transfer them to community-based, nonprofit credit unions.

In a survey released Nov. 8, CUNA reported credit unions had added 40,000 members and $80 million of savings deposits on Bank Transfer Day. Some have disputed the numbers.

The trade journal American Banker cited officials of the American Bankers Association who wondered whether the boost in membership might not reflect the regular ebb and flow of accounts, rather than a net gain. The article also questioned whether money had truly flowed away from big banks, or whether in fact consumers had opened credit union accounts just as a show of solidarity, without shifting assets.

Locally, Bank Transfer Day had a noticeable, though by no means, overwhelming impact.

“We didn’t have people standing outside our doors, but there was a nice wave,” said Lisa Farnen, vice president of marketing at Electro Savings Credit Union in St. Louis.

While the much-publicized event did bring in “a good number” of new members, Farnen said, it also helped move the needle on public awareness about the role that credit unions play in the world of consumer finance. “We saw many people coming in or calling the credit union just to ask: Do we do that or do we do this?”

Those are the questions credit union executives want to hear. In order to build on the growing momentum of dissatisfaction with large banks, they say, credit unions need to make a concerted effort to educate the public as to the breadth of their services.

More than 50 percent of Missouri consumers don’t understand the credit union model, said Mike Beall, president of the Missouri Credit Union Association, which represents 137 institutions. “Bank Transfer Day helped focus consumers on the question of what is a credit union and what does it offer me?” he said. “It has enabled us to get in play with a number of consumers who are now looking for something better than what they have had at their large bank or even a local community bank.”

While credit unions are not at all like large banks, the pitch goes, they are in fact just like large banks. In a sense, credit unions walk a fine line with this kind of talk. On the one hand, they are eager to distinguish themselves from larger banks, which they characterize as pricey, faceless and out of touch with their communities. At the same time, credit unions have to overcome a widespread perception that they do not offer the same breadth of services as do larger institutions.

“We have to get across to them that we are like a bank in many ways,” Farnen said. “We have checking accounts, loans, money markets, ATM networks that span not just the city or state but the nation and the world. We’ve got all that stuff that the banks have.”

In the spirit of community banking, Electro Savings broadcasts this message at the grass-roots level. Its business development officers work directly with community organizations close to its four branches. The credit union also offers financial education seminars at apartment communities around its branches.

“We don’t have the budget to go out and blast radio, TV and billboards. The messages we are trying to resonate take longer than a 30-second commercial,” Farnen said. “We really have to talk to people.”

Neighbors Credit Union pursues much the same course, adding into the mix active participation in community-based charity events. “Credit unions’ whole philosophy is people helping people, and the best way to share that message is to get out there and do it,” Buehl said.

While these efforts may help boost membership numbers, some in the industry are not satisfied with that figure as a meaningful metric. The issue, they say, is not how many are banking, but how much they bank. In a perfect world consumers would turn to their credit unions not just for checking accounts but also for auto loans, money market accounts and other products.

When that doesn’t happen, First Missouri’s Ogolin is ready to cut them loose.

Membership at the credit union requires a $25 balance in a savings account. If someone opens an account just to get a good rate on a car loan, then pays off the loan and never comes back for more financial help, Ogolin will eventually send back the $25 and close the account.

“It’s better for the membership as a whole if we can lower the cost of doing business,” he said.

Meanwhile, as credit unions look for ways to capitalize on the growing public frustration with big banks, the big banks themselves may continue to be the credit unions’ best friend.

Ever since the Bank of America debacle, “there has been got a lot of coverage, and that has piqued people’s attention,” Farnen said. “If anything, what the banks did at least gave us our 15 seconds of fame.”